You’ve probably heard of the Roth IRA and the Traditional IRA, but did you know there are eleven varieties of IRAs? Yeah… there are a combined total of eleven types of IRAs and most of them are variations of the traditional or Roth IRA. For your reading pleasure, the eleven IRA types (and their descriptions) are:
- First off, an Individual Retirement Account is a traditional or Roth that is set up with a financial institution like a bank, brokerage, or mutual fund. You can invest in stocks, bonds, MM, CDs, etc.
- Next is the Individual Retirement Annuity which is a traditional or Roth that is set up with a life insurance company when you purchase an annuity.
- An Employer and Employee Association Trust Account, common also known as a group IRA, is a traditional IRA that is setup by your employer, union or some other employee group.
- A SEP-IRA, or Simplified Employee Pension IRA, is a traditional IRA that is set up by an employer for a company’s employees. The rules with a SEP are that the employer can contribute up to 25% of an employee’s compensation or $45,000, whichever is lower.
- A SIMPLE IRA, or Savings Incentive Match Plan for Employees IRA, is another traditional IRA. How a SIMPLE works is that an employee can contribute up to $10,000 or 100% of their compensation, whichever is lower, and the employer will match up to 3%.
- A Spousal IRA is a traditional or Roth that is funded by a person’s spouse if they earn less than $2,000 that year. The couple must file a joint tax return and the maximum is shared across both accounts.
- A Rollover IRA, also called a Conduit IRA, is a traditional IRA that has been “rolled over” from a 401k, 403b, or some other similar account. There are no limits to the rollover.
- An Inherited IRA is a traditional or a Roth acquired by a beneficiary, that isn’t a spouse, of a deceased IRA owner. There are some special rules with this and I recommend you read up on them if you’re in this situation.
- An Education IRA (EIRA) is an IRA set up so that the funds will go towards the beneficiery’s education. The contributions are not tax deductible, so like a Roth, but all deposits and earnings are tax free if they are used for higher education.
- Lastly there is the Traditional IRA…
- And the Roth IRA.
There you go… eleven types of IRAs.